Hershey Trust Co. (Private Wealth Management)

My first vocational experience was at the Hershey Trust Company. First some background on the Trust: Created in 1905 by Milton Hershey himself, it is responsible for financing entirely the expenses of the Milton S. Hershey school for disadvantaged children. The Trust has USD 7B under management, of which USD 3B are in the stock of Hershey Foods (the chocolate factory), USD 3B are for discretionary investments and USD 1B are under private wealth management (for unrelated wealthy individuals). Recently, the trust has decided to sell its Private Wealth Management business in order to focus exclusively on managing the finances of the school.

I was greeted by Rtn Ray Cameron, an elderly but sprightly man who serves as a Trust Officer in the Private Wealth Management (PWM's) segment.

The Trust's offices are located in the handsome High Point mansion, the former home of Milton Hershey himself. As we passed the gilded gates, I was slightly disappointed to learn that PWM's offices were not located in the mansion. In the end, I settled for a picture.

We then proceeded to the offices where Ray introduced me to Rusty, one of five investment officers in PWM. Rusty is a sharp looking man with a wiry frame and close cropped hair. We sat down for a good 2-hour chat.

I was pleased to discover that PWM and the Hershey Trust had a conservative, small-cap and mid-cap, value-based, bottom-up and equity-heavy focus refreshingly different from the current diversified asset allocation approach followed by many endowments nowadays. The emphasis for their stock portfolio is on finding smaller undervalued companies with good free cash flow, solid balance sheets and strong business models, hopefully before bank analysts discovered them, then holding for the long-term while their stock price appreciated to intrinsic value. Their bond portfolio is invested in safe municipal bonds with very low risk. This approach allowed them to cushion their losses (in a market decline, they incurred smaller losses than average) and recover faster from the 2008 financial crisis, earning a 10.5% annual return over a fifteen year period when the S&P 500 returned a mere 4%.

At the end of the chat, I realised that though our companies are on opposite ends of the world, there were many similarities between the strategies we employed. I guess that while it is not the only way to invest, old-school value investing is definitely a reliable way of generating market beating returns over the long term.

Many thanks Ray for arranging the enlightening visit with Rusty at Hershey Trust Co. PWM!

Rtn Ray Cameron and I in the boardroom of Hershey Trust Co's PWM offices.